Saturday, 28 February 2009

Private military companies to supersede regular armies

24.02.2009 Source: Pravda.Ru
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Private military companies (PMCs) have become rather popular nowadays in terms of providing specialized expertise or services of a military nature. These units can compete with special services and regular armies. There are such companies in Russia, although they are not so widely spread in the country in comparison with their prototypes in the West. As experience shows, the PMCs will prevail in the future.

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The history of private military companies started on June 24, 1997, when experts of the US Intelligence Department proclaimed the PMCs as a major tool in the implementation of the military security policy of the United States and its allies in other countries.

The professional level of a private military company is its major advantage. Inexperienced military men are not welcome there. A PMC member is usually a man between 35-40 years of age. A human being of this age is resistant to stresses and emergency situations. In addition, a man of this age can also do routine work very well, which can not be said about younger men.

Potential fighters of the private military companies possess the required level of experience and have an adequate insight, which allows such units to achieve better results in their activities in comparison with regular armies.

A private military company can be very efficient in local conflicts, where the use of regular armies can be complicated for legal reasons. For example, Russia can not send its troops to Nigeria if Nigerian gunmen attack employees of Russian companies – it would be a gross violation of international laws.

Russian PMCs – Tiger Top Rent Security and Orel Antiterror - do not lag behind their US or British colleagues. The only difference is that Russian PMC fighters are paid a lot less.

Russian PMCs took part in the military actions in Iraq, Afghanistan, Israel, Lebanon and Palestine.

Russia’s largest companies such as Russian Aluminium (Rusal), Lukoil, Rosneft and Gazprom received a carte blanche to form military structures to protect their interests both inside and outside Russia.

Private military companies supply bodyguards for the Afghan president and pilot armed reconnaissance planes and helicopter gunships to destroy Coca crops in Colombia. They are licensed by the State Department; they are contracting with foreign governments, training soldiers and reorganizing militaries in Nigeria, Bulgaria, Taiwan, and Equatorial Guinea. The PMC industry is now worth over $100 billion a year.

Viktor Shishkov

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How the Economy Was Lost By Paul Craig RobertsUpdated at 3:53 PM
February 23, 2009 at 16:34:49

The American economy has gone away. It is not coming back until free trade myths are buried six feet under.

America’s 20th century economic success was based on two things. Free trade was not one of them. America’s economic success was based on protectionism, which was ensured by the union victory in the Civil War, and on British indebtedness, which destroyed the British pound as world reserve currency. Following World War II, the US dollar took the role as reserve currency, a privilege that allows the US to pay its international bills in its own currency.

World War II and socialism together ensured that the US economy dominated the world at the mid 20th century. The economies of the rest of the world had been destroyed by war or were stifled by socialism.

The ascendant position of the US economy caused the US government to be relaxed about giving away American industries, such as textiles, as bribes to other countries for cooperating with America’s cold war and foreign policies. For example, Turkey’s US textile quotas were increased in exchange for over-flight rights in the Gulf War, making lost US textile jobs an off-budget war expense.

In contrast, countries such as Japan and Germany used industrial policy to plot their comebacks. By the late 1970s, Japanese auto makers had the once dominant American auto industry on the ropes. The first economic act of the “free market” Reagan administration in 1981 was to put quotas on the import of Japanese cars in order to protect Detroit and the United Auto Workers.

Eamonn Fingleton, Pat Choate, and others have described how negligence in Washington DC aided and abetted the erosion of America’s economic position. What we didn’t give away, we let be taken from us while preaching a “free trade” doctrine at which the rest of the world scoffed.

Fortunately, our adversaries at the time, the Soviet Union and China, had unworkable economic systems that posed no threat to America’s diminishing economic prowess.

The proverbial hit the fan when Soviet, Chinese, and Indian socialism collapsed around 1990, to be followed shortly thereafter by the rise of the high speed Internet. Suddenly, American and other first world corporations discovered that a massive supply of foreign labor was available at practically free wages.

To get Wall Street analysts and shareholder advocacy groups off their backs, and to boost shareholder returns and management bonuses, American corporations began moving their production for American markets offshore. Products that were made in Peoria are now made in China.

As offshoring spread, American cities and states lost tax base, and families and communities lost jobs. The replacement jobs, such as selling the offshored products at Wal-Mart, brought home less pay.

“Free market economists” covered up the damage done to the US economy by preaching a New Economy based on services and innovation. But it wasn’t long before corporations discovered that the high speed Internet let them offshore a wide range of professional service jobs. In America, the hardest hit have been software engineers and information technology (IT) workers.

The American corporations quickly learned that by declaring “shortages” of skilled Americans, they could get from Congress H-1b work visas for lower paid foreigners with whom to replace their American work force. Many US corporations are known for forcing their US employees to train their foreign replacements in exchange for severance pay.

Chasing after shareholder return and “performance bonuses,” US corporations deserted their American workforce. The consequences can be seen everywhere. The loss of tax base has threatened the municipal bonds of cities and states and reduced the wealth of individuals who purchased the bonds. The lost jobs with good pay resulted in the expansion of consumer debt in order to maintain consumption. As the offshored goods and services are brought back to America to sell, the US trade deficit has exploded to unimaginable heights, calling into question the US dollar as reserve currency and America’s ability to finance its trade deficit.

As the American economy eroded away bit by bit, “free market” ideologues produced endless reassurances that America had pulled a fast one on China, sending China dirty and grimy manufacturing jobs. Free of these “old economy” jobs, Americans were lulled with promises of riches. In place of dirty fingernails, American efforts would flow into innovation and entrepreneurship. In the meantime, the “service economy” of software and communications would provide a leg up for the work force.

Education was the answer to all challenges. This appeased the academics, and they produced no studies that would contradict the propaganda and, thus, curtail the flow of federal government and corporate grants.

The “free market” economists, who provided the propaganda and disinformation to hide the act of destroying the US economy, were well paid. And as Business Week noted, “outsourcing’s inner circle has deep roots in GE (General Electric) and McKinsey,” a consulting firm. Indeed, one of McKinsey’s main apologists for offshoring of US jobs, Diana Farrell, is now a member of Obama’s White House National Economic Council.

The pressure of jobs offshoring, together with massive imports, has destroyed the economic prospects for all Americans, except the CEOs who receive “performance” bonuses for moving American jobs offshore or giving them to H-1b work visa holders. Lowly paid offshored employees, together with H-1b visas, have curtailed employment for older and more experienced American workers. Older workers traditionally receive higher pay. However, when the determining factor is minimizing labor costs for the sake of shareholder returns and management bonuses, older workers are unaffordable. Doing a good job, providing a good service, is no longer the corporation’s function. Instead, the goal is to minimize labor costs at all cost.

Thus, “free trade” has also destroyed the employment prospects of older workers. Forced out of their careers, they seek employment as shelf stockers for Wal-Mart.

I have read endless tributes to Wal-Mart from “libertarian economists,” who sing Wal-Mart’s praises for bringing low price goods, 70% of which are made in China, to the American consumer. What these “economists” do not factor into their analysis is the diminution of American family incomes and government tax base from the loss of the goods producing jobs to China. Ladders of upward mobility are being dismantled by offshoring, while California issues IOUs to pay its bills. By shifting production offshore, offshoring reduces US GDP. When the goods and services are brought back to America to be sold, they increase the trade deficit. As the trade deficit is financed by foreigners acquiring ownership of US assets, the change in ownership means that profits, dividends, capital gains, interest, rents, and tolls leave American pockets for foreign ones.

The demise of America’s productive economy left the US economy dependent on finance, in which the US remained dominant because the dollar is the reserve currency. With the departure of factories, finance went in new directions. Mortgages, which were once held in the portfolios of the issuer, were securitized. Individual mortgage debts were combined into a “security.” The next step was to strip out the interest payments to the mortgages and sell them as derivatives, thus creating a third debt instrument based on the original mortgages.

In pursuit of ever more profits, financial institutions began betting on the success and failure of various debt instruments and by implication on firms. They bought and sold collateral debt swaps. A buyer pays a premium to a seller for a swap to guarantee an asset’s value. If an asset “insured” by a swap falls in value, the seller of the swap is supposed to make the owner of the swap whole. The purchaser of a swap is not required to own the asset in order to contract for a guarantee of its value. Therefore, as many people could purchase as many swaps as they wished on the same asset. Thus, the total value of the swaps greatly exceeds the value of the assets. (An excellent explanation of swaps can be found here.

The next step is for holders of the swaps to short the asset in order to drive down its value and collect the guarantee. As the issuers of swaps were not required to reserve against them, and as there is no limit to the number of swaps, the payouts can easily exceed the net worth of the issuer.

This was the most shameful and most mindless form of speculation. Gamblers were betting hands that they could not cover. The US regulators had abandoned their posts. The American financial institutions abandoned all integrity. As a consequence, American financial institutions and rating agencies are trusted nowhere on earth.

The US government should never have used billions of taxpayers’ dollars to pay off swap bets as it did when it bailed out the insurance company AIG. This was a stunning waste of a vast sum of money. The federal government should declare all swap agreements fraudulent contracts, except for a single swap held by the owner of the asset. Simply wiping out these fraudulent contracts would remove the bulk of the vast overhang of “troubled” assets that threaten financial markets.

The billions of taxpayers’ dollars spent buying up subprime derivatives were also wasted. The government did not need to spend one dime. All government needed to do was to suspend the mark-to-market rule. This simple act would have removed the solvency threat to financial institutions by allowing them to keep the derivatives at book value until financial institutions could ascertain their true values and write them down over time.

Taxpayers, equity owners, and the credit standing of the US government are being ruined by financial shysters who are manipulating to their own advantage the government’s commitment to mark-to-market and to the “sanctity of contracts.” Multi-trillion dollar “bailouts” and bank nationalization are the result of the government’s inability to respond intelligently.

Two more simple acts would have completed the rescue without costing the taxpayers one dollar: an announcement from the Federal Reserve that it will be lender of last resort to all depository institutions including money market funds, and an announcement reinstating the uptick rule.

The uptick rule was suspended or repealed a couple of years ago in order to permit hedge funds and shyster speculators to rip-off American equity owners. The rule prevented short-selling any stock that did not move up in price during the previous day. In other words, speculators could not make money at others’ expense by ganging up on a stock and short-selling it day after day.

As a former Treasury official, I am amazed that the US government, in the midst of the worst financial crises ever, is content for short-selling to drive down the asset prices that the government is trying to support. No bailout or stimulus plan has any hope until the uptick rule is reinstated.

The bald fact is that the combination of ignorance, negligence, and ideology that permitted the crisis to happen is still present and is blocking any remedy. Either the people in power in Washington and the financial community are total dimwits or they are manipulating an opportunity to redistribute wealth from taxpayers, equity owners and pension funds to the financial sector.

The Bush and Obama plans total 1.6 trillion dollars, every one of which will have to be borrowed, and no one knows from where. This huge sum will compromise the value of the US dollar, its role as reserve currency, the ability of the US government to service its debt, and the price level. These massive costs are pointless and are to no avail as not one step has been taken that would alleviate the crisis.

If we add to my simple menu of remedies a ban, punishable by instant death, for short selling any national currency, the world can be rescued from the current crisis without years of suffering, violent upheavals and, perhaps, wars.

According to its hopeful but economically ignorant proponents, globalism was supposed to balance risks across national economies and to offset downturns in one part of the world with upturns in other parts. A global portfolio was a protection against loss, claimed globalism’s purveyors. In fact, globalism has concentrated the risks, resulting in Wall Street’s greed endangering all the economies of the world. The greed of Wall Street and the negligence of the US government have wrecked the prospects of many nations. Street riots are already occurring in parts of the world. On Sunday February 22, the right-wing TV station, Fox “News,” presented a program that predicted riots and disarray in the United States by 2014.

How long will Americans permit “their” government to rip them off for the sake of the financial interests that caused the problem? Obama’s cabinet and National Economic Council are filled with representatives of the interest groups that caused the problem. The Obama administration is not a government capable of preventing a catastrophe.

If truth be known, the “banking problem” is the least of our worries. Our economy faces two much more serious problems. One is that offshoring and H-1b visas have stopped the growth of family incomes, except, of course, for the super rich. To keep the economy going, consumers have gone deeper into debt, maxing out their credit cards and refinancing their homes and spending the equity. Consumers are now so indebted that they cannot increase their spending by taking on more debt. Thus, whether or not
the banks resume lending is beside the point.

The other serious problem is the status of the US dollar as reserve currency. This status has allowed the US, now a country heavily dependent on imports just like a third world or lesser-developed country, to pay its international bills in its own currency. We are able to import $800 billion annually more than we produce, because the foreign countries from whom we import are willing to accept paper for their goods and services.

If the dollar loses its reserve currency role, foreigners will not accept dollars in exchange for real things. This event would be immensely disruptive to an economy dependent on imports for its energy, its clothes, its shoes, its manufactured products, and its advanced technology products.

If incompetence in Washington, the type of incompetence that produced the current economic crisis, destroys the dollar as reserve currency, the “unipower” will overnight become a third world country, unable to pay for its imports or to sustain its standard of living.

How long can the US government protect the dollar’s value by leasing its gold to bullion dealers who sell it, thereby holding down the gold price? Given the incompetence in Washington and on Wall Street, our best hope is that the rest of the world is even less competent and even in deeper trouble. In this event, the US dollar might survive as the least valueless of the world’s fiat currencies.

Author's Bio: Paul Craig Roberts, a former Assistant Secretary of the US Treasury and former associate editor of the Wall Street Journal, has held numerous academic appointments.


Friday, 27 February 2009

“A Whole New Kind of Struggle is Emerging”

John Bellamy Foster is editor of Monthly Review and professor of sociology at the University of Oregon. He is the coauthor with Fred Magdoff of The Great Financial Crisis: Causes and Consequences, recently published by Monthly Review Press.

Mike Whitney: The financial crisis is quickly turning into a political crisis. Already governments in Iceland and Latvia have collapsed and the global slump is just beginning to accelerate. Riots and street violence have broken out in Greece, Latvia and Lithuania and worker-led protests have become commonplace throughout the EU. As unemployment skyrockets and economic activity stalls, countries are likely to experience greater social instability. How does one take deep-seated discontent and rage and shape it into a political movement for structural change?

John Bellamy Foster: The first thing to recognize is that we are suddenly in a different historical period. One of my favorite quotes comes from Gillo Pontecorvo’s 1969 film Burn! where the main character, William Walker (played by Marlon Brando), states: “Very often between one historical period and another, ten years suddenly might be enough to reveal the contradictions of an entire century.” We are living in such a period, not only because of the Great Financial Crisis and what the IMF is now calling a depression in the advanced capitalist economies, but also because of the global ecological crisis that during the last decade has accelerated out of control under business as usual, and due to the reappearance of “naked imperialism.” What made sense ten years ago is nonsense now. New dangers and new possibilities are opening up. A whole different kind of struggle is emerging.

The sudden fall of the governments in Iceland and Latvia as a result of protests against financial theft is remarkable, as are the widespread revolts in Greece and throughout the EU, with millions in the streets. The general strikes in Guadeloupe and Martinique, the French Antilles, and the support given to these movements by the French New Anti-Capitalist Party is a breakthrough. In fact much of the world is in ferment. Latin Americans are engaged in a full-scale revolt against neoliberalism, led by Venezuela’s Bolivarian Revolution, and the aspiration of a new socialism for the 21st century (as envisioned also in Bolivia, Ecuador and Cuba). The Nepalese revolution has offered new hope in Asia. Social struggles on a major scale are occurring in emerging economies such as Brazil, Mexico, and India. China itself is experiencing unrest.

The one place in the world where this world historical ferment appears to not be having telling effect at present is the United States. This can be traced to two reasons. First, the United States as the center of a world empire is a fortress of conservatism. Second, the election of the Obama administration has confused progressive forces, leading to absurd notions that the Democrats under Obama are going to create a New New Deal without renewed pressure arising from a revolt from below. Meanwhile, under Obama’s watch, and with the help of his chosen advisers, vast amounts of state funds are being infused into the financial system to benefit private capital.

What is needed in the United States today, we argue in The Great Financial Crisis, is a renewal of the classic concept of political economy (with its class perspective), whereby it comes to be understood that the economy is subject to public control, and should be wrested from the domination of the ruling class. The bailing out of the system right now is going on with taxpayer funds but without the say of the public. A revolt to gain popular control of the political economy is therefore necessary.

It is possible to start with the demand for a New New Deal rooted in the best legacy of the Roosevelt administration in the 1930s, most notably the Works Progress Administration. But as Robert McChesney and I argued in “A New New Deal Under Obama?” in the February 2009 issue of Monthly Review, the struggle has to move quickly beyond that to an expansion of workers’ rights along socialist principles, breaking with the logic of capital. For this to occur there has to be a great revolt from below on at least the scale of the industrial unionization movement of the 1930s that created a new political force in the country (later destroyed in the McCarthy Era). The story of this struggle is told in David Milton’s classic account, The Politics of U.S. Labor, which also points out that the rising labor movement was led by socialists and radical syndicalists.

It is important, as István Mészáros explained in his Beyond Capital, that the radical politics opened up in this historical moment not be diverted into attempting to save the existing system, but be directed at transcending it. As Mészáros wrote: “To succeed in its original aim, radical politics must transfer at the height of the crisis its aspirations — in the form of effective powers of decision making at all levels and all areas, including the economy — to the social body itself from which subsequent material and political demands would emanate.”

In the United States a primary goal of any radical politics should be to cut military spending, which is the imperial iron heel holding down the entire world, while corrupting the US body politic and diverting surplus from pressing social needs.

The obvious weak link of the whole political, ideological and economic structure in command in the United States today, is that the system has clearly failed to meet peoples’ real needs. Rather than addressing these pressing needs in the crisis, the emphasis of the economic overlords is to bailout private capital at virtually any cost. Between October 2008 and January 2009 the federal government provided about $160 billion in capital and infusions and debt guarantees to the Bank of America, which had a total net worth in late January of only a small fraction of that amount. The rest had gone down the rat hole.

The robbing of public funds to bailout private capital is now on a scale probably never before seen. A politicized, organized working class capable of understanding and reacting to that theft, and choosing thereby to restructure society, to meet real social, egalitarian needs is what is now to be hoped for. The title of a recent cover story Newsweek declared: “We Are All Socialists Now.” As it turned out, Newsweek’s editors were simply referring to the increase in public spending now taking place — hardly an indication of socialism. But the fact that this is said at all in the mainstream media points to the fact that we are in a different historical moment in which radical forces have the possibility of moving forward.

MW: As the economy has become more dependent on financialization for growth, the gap between rich and poor has grown wider and wider. As you point out in your book, “In the United States the top 1 percent of wealth holders in 2001 owned more than twice as much as the bottom 80 percent of the population. If this was simply measured in terms of financial wealth, the top 1 percent owned more than four times the bottom 80 percent.” (p 130). How have working class people managed to keep their heads above water with all this wealth being shifted to the rich?

JBF: The answer is fairly obvious. If people cannot maintain their standard of living on the basis of their income, they will borrow against income and against whatever wealth they have. The result— if their incomes don’t rise, or if the value of whatever assets they have do not increase — is that they will simply get deeper and deeper in debt in an attempt simply to stand still. I became concerned about the growth of working-class household debt in 2000 and carried out a study of The Survey of Consumer Finances, which is published every three years by the federal government with a three year lag in the data. This is the only major federal government data source that we have on household debt broken down into income groups so that we can determine the debt burden of different classes. I published an article based on this research in the May 2000 issue of Monthly Review entitled “Working-Class Households and the Burden of Debt.” I then followed this up six years later with an article in the May 2006 Monthly Review on “The Household Debt Bubble,” which was to be incorporated into The Great Financial Crisis. There I wrote that “The housing bubble and the strength of consumption in the economy are connected to what might be termed the ‘household debt bubble,’ which could easily burst as a result of rising interest rates and the stagnation or decline of housing prices.” This is of course what happened, and the reason why this crisis has turned out to be so severe was the destruction over decades of the finances of working-class households, on the back of which financialization took place.

MW: Will you define “debt-deflation” and explain its potential danger to the economy? As credit continues to tighten and housing prices sink; aren’t we slipping into a reinforcing deflationary spiral? Do you think that fiscal policy will reverse this trend or is the stimulus package too small to stop real estate and equities from continuing to slide?

JBF: The term “debt-deflation” is associated particularly with the work of Irving Fisher during the Great Depression. Fisher wrote an article for the journal Econometrica in 1933 entitled “The Debt-Deflation Theory of Great Depressions.” Deflation as applied to the general economy is a drop in the general price level, something not seen in the United States since the Great Depression, and catastrophic in the economy of monopoly capital (and even more so under monopoly-finance capital). In the first place, deflation (or disinflation, i.e. the reduction of inflation to what the Federal Reserve calls “below optimal” levels) means that the profit margins of corporations are squeezed, even if the cost structure of production, and productivity remain the same. Under these circumstances price competition is reactivated with giant firms actually in a life and death struggle. This also generates pressure for heavy layoffs and wage reductions, creating all sorts of vicious cycles.

But the real fear of deflation has to do with the enormously bloated financial structure and the huge debt load of the economy. Under inflation, which is usually assumed to be built into the advanced capitalist economy, debts are paid back with smaller dollars (that is, worth less over time). In a deflationary economy, however, debt has to be paid back with bigger dollars (worth more over time). This then creates a debt-deflation spiral, enormously accelerating financial meltdown. As Fisher put it, “deflation caused by the debt reacts on the debt. Each dollar of debt still unpaid becomes a bigger dollar, and if the over-indebtedness with which we started was great enough, the liquidation of debt cannot keep up with the fall of prices which it causes.” Stated differently, quoting from The Great Financial Crisis (p. 116), “prices fall as debtors sell assets to pay their debts, and as prices fall the remaining debts must be repaid in dollars more valuable than the ones borrowed, causing more defaults, leading to yet lower prices, and thus a deflationary spiral.” In order to check this deflationary tendency, the Federal Reserve and the Treasury have been trying to reflate the economy by printing money (euphemistically called “quantitative easing”). But they have not succeeded and deflationary forces are still very strong, causing President Obama to warn shortly after his election that “we now risk falling into a deflationary spiral that could increase our massive debt even further.”

It is also worth mentioning the effect that deflation has on investment. With capital faced with the fact that a few years down the line the price level could be lower than it is now, expected profits on investment in new productive capacity (given that this takes years to be built and has to paid for in current prices) are depressed, creating a deeper stagnation of accumulation.

The stimulus package introduced by the Obama administration is far too small to pump up demand and reflate the economy under these circumstances. It is less than $400 billion a year, forty percent of which is tax cuts, so that the increased governmental spending is minuscule compared to the size of the hole created by the drastic drop in consumption, investment, and state and local government spending. It is also dwarfed by the total federal government support programs, primarily to financial institutions, which now amount to more than $9.7 trillion in the form of cash infusions, debt guarantees, swaps of Treasuries for financial toxic waste, etc.

MW: Karl Marx seems to have anticipated the financial meltdown we are now facing. In Capital,he said, “The superficiality of political economy shows itself in the fact that it views the expansion and contraction of credit as the cause of the periodic alterations of the industrial cycle, while it is a mere symptom of them.” Marx appears to agree with your theory that the real problem is deeper — economic stagnation which forces surplus capital to look for more profitable investments. While the monetarist theories of Milton Friedman are now under withering attack, Keynes and Marx seem to have held up rather well. What does Marx mean when he talks about “political economy”?

JBF: Marx was an acute analyst of financial crises in his time and described their main features. However, he saw financial expansions as occurring at the peak of a boom, not as a secular phenomenon. Financialization in the sense of a long-term shift in the center of gravity of the economy toward finance, with financial speculation building over decades, is a completely unprecedented situation.

Marx and Engels did place great emphasis on the growth of joint-stock companies/corporations and the appearance of a market for industrial securities that began to appear near the end of the nineteenth century. It was this creation of the modern market for industrial securities that was the real beginning of the emergence of finance as a relatively independent aspect of the monopoly capitalist economy. There are essentially two pricing structures to the economy: one in the real economy related to the production of goods and services, the other in the financial realm associated with the pricing of assets (paper claims to wealth). The two are interrelated but can be disassociated from each other for periods of time. Keynes in the 1930s singled-out the dangers of an economy that was increasingly governed by the speculative pricing of financial assets. Marx was such an acute observer of capitalism, that even in his time he began to see the contradictions emerging between money (or fictitious) capital and real capital.

One thing that Marx did argue in this context is that surges in financial speculation were responses to stagnation and decline in the real economy, as capital desperately sought a way to maintain and expand its surplus. Thus he wrote that the “plethora of money capital” in such periods was due to “difficulties in employment, through a lack of spheres of investment, i.e., due to a surplus in the branches of production” and showed nothing so much as the immanent barriers to capitalist expansion (quoted in The Great Financial Crisis, p. 39).

Marx remains the strongest foundation for the critique of the capitalist economy, down to our day. But the real Keynes (not to be confused with the bastardized Keynesianism of today) is also important, since he emphasized what he called the “outstanding faults” of the capitalist economy: the tendency to high inequality and high unemployment. He also pointed to the dangers of a system geared to speculative finance.

MW: Is wage stagnation and income inequality a direct result of financialization?

JBF: I would put it the other way around. Wage stagnation and growing income and wealth inequality are components of the underlying stagnation tendency. Both have shown a tendency to worsen over time, resulting in deepening stagnation tendencies within the overall economy. Real wages in the United States peaked in 1971, when Richard Nixon was president, and by 2008 had fallen back to 1967 levels, when Lyndon Johnson was president. This is in despite of the enormous growth of productivity and expansion of wealth over the intervening decades. Hence, this is a marker of “the tendency of surplus to rise,” as Baran and Sweezy put it, or a rising rate of surplus value, in Marx’s own terms. This was accompanied by a massive growth of income and wealth at the top. As we stated in The Great Financial Crisis (p. 130), “From 1990 to 2002, for each added dollar made by those in the bottom 90 percent [of income] those in the uppermost 0.01 percent (today about 14,000 households) made an additional $18,000.” By 2007 income/wealth inequality in the United States had reached 1929 proportions, i.e., the level reached just prior to the 1929 Stock Market Crash that led to the Great Depression.

I do think you are right, though, that financialization made income and wealth inequality worse, and contributed to the stagnation of wages. We can see neoliberalism as basically the ideology of monopoly-finance capital, introduced originally as the ruling class response to stagnation, and then increasingly geared to promoting the financialization of capital, itself a structural response to stagnation.

Neoliberalism promoted incessant breaking of unions, forcing down wages, cutting state social welfare spending, deregulation, free mobility of capital, development of new financial architecture, etc. One way to understand this is the enormous need for new cash infusions to feed a financial superstructure that was voracious in its demand for new money capital, which it needed to leverage still more piling up of debt and financial speculation. Insurance companies, real estate, and mutual funds all provided infusions into this financial superstructure, as did the state. All limits were removed. Under these circumstances workers were encouraged to use their houses like piggy banks to finance consumption, credit cards were handed out to teenagers, subprime loans were pushed on those with little ability to pay. Individual retirement packages were shifted toward IRAs that were tied into the speculative financial system. This had all the signs of an addictive system. In these circumstances, too, the real economy, particularly production of goods and manufacturing, was decimated. In the introduction to The Great Financial Crisis we include a chart covering the period since 1960 showing production of goods as a percentage of GDP in a slow, long-term decline, while debt as a percentage of GDP is skyrocketing over the same period. All of this meant a massive redistribution away from working people to capital, and to those at the pinnacle of the financial pyramid.

MW: In your book The Great Financial Crisis, you are critical of Paulson’s capital injections into the banks saying that “at most they buy the necessary time in which the vast mass of questionable loans can be liquidated in an orderly fashion, restoring solvency but at a far lower rate of economic activity — that of a serious recession or depression.” On Friday, Timothy Geithner told CNBC that “We will preserve the system that is owned and managed by the private sector.” This suggests that the Treasury Secretary might not liquidate the toxic assets at all, but try maintain the appearance that these underwater banks are solvent. What do you think will happen if Geithner refuses to nationalize the banks?

JBF: I would not interpret Geithner’s statement that way. Rather we are experiencing one of the greatest robberies in history. I have written on the question of nationalization for the “Notes from the Editors” forthcoming in the March 2009 Monthly Review. All the attempts to rescue the financial system at this time go in the direction of nationalization. The federal government is providing more and more of the capital and assuming financial responsibility for the banks. However, they are doing everything they can to keep the banks in private hands, resulting in a kind of de facto nationalization with de jure private control. Whether the federal government is forced eventually toward full nationalization (that is, assuming direct control of the banks) is a big question. But even that is unlikely to change the nature of what is going on, which is a classic case of the socialization of losses of financial institutions while leaving untouched the massive gains still in the hands of those who most profited from the whole extreme period of financial speculation.

To get an idea of what is happening one has to understand that the federal government, as I have already indicated, has committed itself thus far in this crisis $9.7 trillion in support programs primarily for financial institutions. The Federal Reserve (together with the Treasury) now has converted itself into what is called a “bad bank.” It has been swapping Treasury certificates for toxic financial waste, such as collateralized debt obligations. As a result the Federal Reserve has become the banker of last resort for toxic waste with the share of Treasuries in the Fed’s balance sheet dropping from about 90 percent to about 20 percent over the course of the crisis, with much of the rest now made up of financial toxic waste.

Obviously, full, straightforward nationalization would be more rational than this. But one has also to remember the system of power — both economic and political — that we are dealing with at present. The classic case of full bank nationalization was Italian corporatist capitalism of the 1920s and ‘30s, and was carried out by the fascist regime. Without suggesting that we are headed this way now it should be clear from this that nationalization of banks itself is no panacea.

The fact that Geithner, Obama’s pick for Treasury Secretary, is overseeing the enormous robbery taking place, probably exceeding any theft in history, with the ordinary taxpayers picking up the tab, should certainly cause one to ask questions about the “progressive” nature of the new administration.

MW: Former Fed chief Alan Greenspan has dismissed criticism of his monetary policies saying that no one could have seen the humongous credit bubble developing in housing. In your book, however, you make this observation: “It was the reality of economic stagnation beginning in the 1970s . . . that led to the emergence of the ‘new financialized capitalist regime’s kind of ‘paradoxical financial Keynesianism’ whereby demand in the economy was stimulated primarily ‘thanks to asset bubbles.’” (p 129) The statement suggests that the Fed knew exactly what it was doing when it slashed rates and created a speculative frenzy. Debt-fueled asset bubbles are a way of shifting wealth from one class to another while avoiding the stagnation of the underlying economy. Can this problem be fixed through regulation and better oversight or is it something that is intrinsic to capitalism itself?

JBF: Greenspan is of course trying desperately to salvage his reputation and to remove any sense that he is culpable. I would agree that the Fed knew what it was doing up to a point, and deliberately promoted an asset bubble in housing — what Stephanie Pomboy called “The Great Bubble Transfer” following the bursting of the New Economy tech bubble in 2000. The view that no one saw the dangers of course is false. It reminds me of Paul Krugman’s face-saving claim in his The Return of Depression Economics and the Crisis of 2008 that while some people thought that financial and economic problems of the 1930s might repeat themselves, these were not “sensible people.” According to Krugman, “sensible people” like himself (that is, those who expressed the consensus of those in power) knew that these things could never happen — but turned out to be wrong. It is true, as Greenspan says, no one could have foreseen precisely what really happened. And certainly there were a lot of blinders at the top. But there were lots of warnings and concerns. For example, I drafted an article (“The Great Fear”) for the April 2005 issue of Monthly Review that referred to “rising interest rates (threatening a bursting of the housing bubble supporting U.S. consumption)” as one of the key “perils of a stagnating economy.” Other close observers of the economy were saying the same thing.

The Federal Reserve Board, indeed, was internally debating in these years whether to adopt a policy of pricking the asset bubbles before they got further out of control. But Greenspan and Bernanke were both against such a dangerous operation, claiming that this could bring the whole rickety financial structure down. Since they didn’t know what to do about asset bubbles they simply sat on their hands and tried to talk the market up. The dominant view was that the Federal Reserve could stop a financial avalanche by putting a rock in the right place the moment there was a sign of trouble. So Bernanke went ahead, closed his eyes and prayed, raising interest rates to restrict inflation (an action demanded by the financial elite) and the rest is history.

At all times it was those at the commanding heights of the financial institutions that called the shots, and the Fed followed their wishes. Greenspan himself is no dummy. He wrote in Challenge Magazine in March-April 1988 of the dangers associated with housing bubbles. But as a Federal Reserve Board chairman he pursued financialization to the hilt, since there was no other option for the system. Needless to say, such financialization was associated with the growing disparities in wealth and income in the country. Debt itself is an instrument of power and those at the bottom were chained by it, while those at the top were using it to leverage rising fortunes. The total net worth of the Forbes 400 richest Americans (an increasing percentage of whom were based in finance) rose from $91.8 billion in 1982 to $1.2 trillion in 2006, while most people in the society were finding it harder and harder to make ends meet. None of this was an accident. It was all intrinsic to monopoly-finance capital.

Mike Whitney lives in Washington state. He can be reached at: Read other articles by Mike.

6 comments on this article so far ...

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  1. Gary Corseri said on February 27th, 2009 at 11:20am #

    Excellent interview. Whitney asks all the right questions and Foster’s analysis is cogent. Especially compelling for me is the idea that we are at the beginning of an epochal paradigm shift such as has not been experienced in the lifetime of most Americans.

    Gradually, over the past few months, writers like Whitney, Foster, Paul Craig Roberts, Richard Cook have begun to vivisect this unfolding and enfolding human tragedy. The ancient deadly sins emerge again: greed, pride, vanity, sloth. (Add more. There are many!)

    Amidst much fine analysis, this sentence especially struck me: “there has to be a great revolt from below on at least the scale of the industrial unionization movement of the 1930s that created a new political force in the country.” As the nefarious collusion between our political mis-leaders (of both wings of the Finance-Capitalist Party) and our economic elite becomes ever painfully clearer to the masses, we must confront these great questions of “revolt from below” and organizing “a new political force.” How will it be done? Positive transformation is the goal. What will that look like?

  2. Paul Meyer said on February 27th, 2009 at 12:16pm #

    Excellent!! I confess I thought nationalization of the banks, and dissolution of the Fed, would solve much of the problem (and it would, but only if the new agencies were well regulated). However, as Americans we have stopped producing; our “base” is now finance (illusory value) rather than the production of things and real service. To regain that, a true socialist movement (where government serves the people, not moneyed elites) needs to arise and take control.

  3. Suthiano said on February 27th, 2009 at 12:43pm #

    Very interesting article.

    Greenspan definitely knew what he was doing… He should be on trial as should every member of the Fed reserve board of directors for the last 20 years.

  4. russell olausen said on February 27th, 2009 at 1:31pm #

    Many years ago I asked myself the question, why would a capitalist system take some of it highly valued resources and educate a low born, such as myself? It turns out the motive was their preservation, much more than my preservation. It is only now that the number of low born being caught in the present crisis is being revealed. It turns out many who thought they were cut from better cloth were really only washed rags. I have taught myself to relearn the major disciplines that enable one to survive in the present age, most importantly mathematics. Philosophy, psychology, history, and physics would round out the compulsory understandings, as well as a true command of the language you expect to communicate in. What I mean is, in order to be somewhat independent you must out think those that would think against you.I wish you all a long life, it will clear up many conundrums you may have.

  5. Ron Horn said on February 27th, 2009 at 1:33pm #

    Corseri: You ask the most important questions of all. I watch with dismay the political stupor of the current American working class whose class consciousness as been so dulled and distorted by many decades of media indoctrination and disinformation following the post WWII purges of radically inclined unions and leftists in general. Compare the dismal political situation here with what is happening elsewhere–protests and riots ( across the globe. How many jobs will have to be lost, teachers laid off, schools closed, factories and businesses shut down, communities destroyed, retirement savings disappeared, dreams shattered before people wake up in this great land of the free and home of the brave?

  6. Michael Kenny said on February 27th, 2009 at 2:32pm #

    The EU is certainly a solid construction! It always seems to be about to explode, disintegrate, fall apart, fall down a hole, go bankrupt, be eaten by locusts, have fire and brimstone hurled down on it from heaven or have some other dire (and, needless to say, irreversible!) catastrophe visited upon it, at least in Mr Whitney’s world view. If I’m not mistaken this is already the third time this week just on this website that impending Euroarmageddon has been announced, the second time by Mr Whitney!

    First of all, there haven’t been “millions” in the streets of Europe. The riots in Greece were set off by the shooting of a student by a policeman in an incident unrelated to the economic situation. The riots in Latvia and Lithuania were very small beans and there was also a small riot in Iceland, but since that’s outside the EU (although it now says it wants to join!), I suppose it doesn’t count. Equally, the 150000 people who marched peacefully through the streets of Dublin last Saturday also don’t count. They didn’t riot! Worse than that, so to speak, the latest opinion polls show that the crisis has concentrated Irish minds wonderfully and that if the Lisbon Treaty were one again put to a vote (which it probably will be shortly), it would be approved. Indeed, one of the oddities of the crisis is that all criticism of the EU stopped almost overnight. The crisis has drawn Europeans closer to each other and made them see the value of the EU, which is why, I suppose, that US hegemons are trying so hard to create disruption here. Not much sign of Euroarmageddon yet though!

    On the other hand, the docility of Americans is astonishing, whatever the reason for it. It reminds me a bit of Mr Magoo.

So long, Milton Friedman. Hello, James Tobin.

Feb. 27 (Bloomberg) -- After a three-decade run, the free-market philosophies of Friedman that shaped U.S. policy are being eclipsed by the pro- government ideas of Tobin, the late Yale economist and Nobel laureate who brought John Maynard Keynes into the modern era.

Tobin’s stamp is on the $787 billion stimulus signed by President Barack Obama, former students and colleagues say. His philosophies are influencing Austan Goolsbee, a former Tobin student advising Obama, and Ben S. Bernanke, head of the Federal Reserve. Unlike Friedman, Tobin provides guidance for today’s problems, said Paul Krugman, a Princeton University economist.

“Hard-line doctrines don’t seem very appropriate at this troubled moment,” said Krugman, a New York Times columnist who also worked with Tobin at Yale from 1977 to 1979. “Tobin was never a guru in the way Milton Friedman was; he never had legions of Samurai ready to spring to the defense of his theories, but that’s part of why he is so relevant right now.”

The decision by Bernanke last September to invoke the Fed’s emergency powers and put mortgages and other assets on the central bank’s balance sheet “is pure Tobin,” Krugman said. Bernanke cited Tobin’s 1969 essay on monetary theory in a 2004 paper discussing options available to the Federal Reserve for stimulating the economy when interest rates approach zero.

Tobin’s experience of the depression as a teenager in the 1930s gave him a lifelong loathing of unemployment.

‘Livid’ Response

“As a young professor I did a paper where I analyzed the optimal unemployment rate,” said Joseph Stiglitz, a professor at Columbia University in New York, who knew Tobin at Yale. “Tobin went livid over the idea. To him the optimal unemployment rate was zero.”

Like Keynes, Tobin was an advocate for the role of government in maintaining full employment, said James Galbraith, an economist at the University of Texas in Austin. The current economic and financial crisis has validated that philosophy, said Galbraith, a former Tobin student and the son of the late John Kenneth Galbraith, who was a friend of Tobin.

“It’s clear that the position that the federal government has a responsibility for the level of employment, for the economy, has prevailed,” Galbraith said. “The position that the Fed can walk away from the level of employment has completely collapsed. That was the absolutely dominant position coming out of the University of Chicago.”

In contrast to the Friedman-influenced proponents of tax cuts, deregulation and tight control of the money supply, followers of Tobin are more receptive to government intervention in the economy, including stimulus spending.


After Harvard, where he studied under the late Joseph Schumpeter, he spent four years in the U.S. Navy, serving on a destroyer that supported the invasion of North Africa.

Wouk Character

While training to be an officer, he served with Herman Wouk, who later wrote “The Caine Mutiny.” Tobin was Wouk’s model for a character called Tobit, a “mandarin-like midshipman” who had “a domed forehead, measured quiet speech and a mind like a sponge.”

Tobin began teaching at Yale, in New Haven, Connecticut, in 1950, leaving in 1961 and 1962 to serve on the U.S. Council of Economic Advisors under President John F. Kennedy.

At Yale, he put his stamp on generations of economists who studied or taught there. Those include Goolsbee, Krugman, Stiglitz, and Galbraith. Others influenced by Tobin at Yale include Robert Shiller, a Yale economist and creator of the Case/Shiller home price index; Nouriel Roubini, the New York University economist who predicted the financial collapse; Janet Yellen, president of the Federal Reserve Bank of San Francisco; and David Swensen, Yale’s investment manager.

Levin’s Wish

Tobin’s influence on today’s policy makers is still not as powerful as former students would like to see. Richard Levin, the president of Yale, said Tobin would have wanted the stimulus package to create more jobs and contain fewer tax cuts.

“Tobin’s insights are what’s needed right now,” Levin said. “I wish policy makers would listen more carefully to Tobin.”
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Ghost Dog Donating Member (1000+ posts) Journal Click to send private message to this author Click to view this author's profile Click to add this author to your buddy list Click to add this author to your Ignore list Fri Feb-27-09 08:50 AM
Original message
How Not to Waste the Crisis
Edited on Fri Feb-27-09 08:55 AM by Ghost Dog
Jumping to the conclusions of the recent article by Prof. Leo Panitch and Prof. Sam Gindin: From Global Finance to the Nationalization of the Banks: Eight Theses on the Economic Crisis, I find this succinct call to "take the financial system into public control" deserving of note (my emphasis added).

The scale of the crisis today is such that nationalization of the financial system cannot be kept off the political agenda. It is increasingly apparent, that monetary and fiscal stimulation alone are unlikely to succeed in ending the crisis since the banking system's dysfunctionality today undermines the multiplier effect, just as new regulations are supposed to make finance more cautious and prudent in their lending. Indeed, there has been an increasing realization that it may not be possible to keep off the political agenda much longer the issue of bringing large portions of the financial system into public ownership. This is advanced today along the lines of the temporary nationalizations that took place in Sweden and Japan during their financial crises in the 1990s whereby the state took on the banks' bad debts and then passed the banks back to the private sector.

It is a measure of the severity of the crisis that nationalization is now being quite generally proposed even within the US although it poses a host of problems as a way of saving global capitalism.

It is highly significant that the last time the nationalization of the banks was seriously raised, at least in the advanced capitalist countries, was in response to the 1970s crisis by those elements on the left who recognized that the only way to overcome the contradictions of the Keynesian welfare state in a positive manner was to take the financial system into public control.

Now that bank nationalization is back on the political agenda (albeit now coming from very different sources), it is very important to contrast the type of band-aid nationalization now being canvassed with the demand for turning the whole banking system into a public utility, which would allow for the distribution of credit and capital to be undertaken in conformity with democratically established criteria. And it is necessary to point out that this would have to involve not only capital controls in relation to international finance but also controls over domestic investment, since the point of making finance into a public utility is to transform the uses to which it is now put.

The call for nationalization of the banks provides an opening for advancing broader strategies that begin to take up the need for systemic alternatives to capitalism. The severity of today's economic crisis once again exposes the old irrationality of the basic logic of capitalist markets. As each firm (and indeed state agency) lays off workers and tries to pay less to those kept on, this has the effect of further undercutting overall demand in the economy.

At the same time, the financial crisis exposes new irrationalities, not least those contained in the widespread proposals for trading in carbon credits as a solution to the climate crisis, which involve depending on volatile derivatives markets that are inherently open to the manipulation of accounts and to credit crashes.

In the context of such readily visible irrationalities, a strong case can be made that -- to save jobs and the communities that depend on them in a way that converts production to ecologically-sustainable priorities during the course of this crisis -- we need to break with the logics of capitalist markets rather than use state institutions to reinforce them. We need to put on the public agenda the need to change our economic and political institutions so as to allow for democratic planning to collectively decide how and where we produce what we need to sustain our lives and our relationship to our environment.

However deep the crisis, however confused and demoralized are capitalist elites both inside and outside the state, and however widespread the popular outrage against them, making this case will certainly require hard and committed work by a great many activists, many of whom will see the need for building new movements and parties to this end.

This is what is really needed if this crisis is not to go to waste.

Leo Panitch is Canada Research Chair in Comparative Political Economy at York University. His most recent books are American Empire and the Political Economy of International Finance and Renewing Socialism: Transforming Democracy, Strategy and Imagination. Sam Gindin, formerly Chief Economist and Assistant to the President of the Canadian Autoworkers Union, holds the Packer Professorship in Social Justice at York University. He is the author of The Canadian Auto Workers: The Birth and Transformation of a Union and (with Panitch) Global Capitalism and American Empire.


... And the same, it might be said, can be said of Europe and all other countries as well as America, with the proviso that Europe may be a little more experienced, less so to the East and South, more so to the North and East, at running democratically-planned economies which take into account, albeit imperfectly, social ends and environmental necessities. This at least provides a degree of basic social security others lack.

Nevertheless History, all seem to agree, is about to change forever accustomed lifestyles and ways of doing things, one way or the other, by means of systemic economic crisis and its aftermath. It is an opportunity that surely should not go to waste.

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Whatever we do to the financial system has to be done with ... ColbertWatcher Feb-27-09 09:02 AM #1
Oh hell yes. Its all about this line: napoleon_in_rags Feb-27-09 09:11 AM #2
That's it! Out with the Old, In with the New. Ghost Dog Feb-27-09 12:41 PM #5
What crisis? ConcernedCanuk Feb-27-09 09:46 AM #3
Controlling it's own currency is one of the prime requisites of any nation. Greyhound Feb-27-09 09:57 AM #4
The American state is absolutely central. Ghost Dog Feb-27-09 02:44 PM #6
ColbertWatcher Donating Member (1000+ posts) Journal Click to send private message to this author Click to view this author's profile Click to add this author to your buddy list Click to add this author to your Ignore list Fri Feb-27-09 09:02 AM
Response to Original message
1. Whatever we do to the financial system has to be done with ...Updated at 7:18 AM
... the idea that one day the GOP (or whatever right-wing party takes their place) may be in power again.

There has to be strict regulation, diligent oversight and severe penalties for crimes.

I'd hate to think that we fixed the problem, only to have a GOP leftover sneak in and exploit a loophole.

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napoleon_in_rags (983 posts) Journal Click to send private message to this author Click to view this author's profile Click to add this author to your buddy list Click to add this author to your Ignore list Fri Feb-27-09 09:11 AM
Response to Original message
2. Oh hell yes. Its all about this line:
Edited on Fri Feb-27-09 09:16 AM by napoleon_in_rags
democratic planning to collectively decide how and where we produce what we need to sustain our lives and our relationship to our environment.

Bank nationalization or not, this is one of the most important ideas of our time. The idealized free market functions on the principles of

1) accurate information on the part of participants
2) infinite information processing time on the part of the participants

What happens in reality, why the free market fails, is that accurate information is obscured. Instead of an assessment based market where consumer needs are discovered through information systems and addressed through products and services, we have a marketing driven system where information is feed to the consumers to regardless of its truth value - all that matters is whether or not the consumer can be convinced of his or need of the product, not the betterment of society through assessing what the consumer really needs: Its about making the consumer need what they have rather than trying to have what the consumer needs. (The mainstream acceptance of protection racket mentalities, essentially. ) The surest, quickest way to address this problem is through democratic planning of products and services needed by consumers, with the realization that the information sources consumers use to make decisions can't be controlled by the same entities who profit from the consumers choices. Beyond that, you can let free market forces work.

The second thing is to get rid of the illusion that people have infinite information processing time, which is to say that busy people can make informed decisions and sort through the crap thrown at them endlessly by ads and corporate controlled media. Eventually we will realize that we need people, be them public or private, whose interests are demonstrably separate from other commercial interests helping us make informed, safe and ethical purchasing decisions. Information systems may get there in the future of the Internet, but in the mean time that means government regulation. We can't wallow in the illusion that all consumers are able to test their food for pathogens, for instance.

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Ghost Dog Donating Member (1000+ posts) Journal Click to send private message to this author Click to view this author's profile Click to add this author to your buddy list Click to add this author to your Ignore list Fri Feb-27-09 12:41 PM
Response to Reply #2
5. That's it! Out with the Old, In with the New.
It's time to provide a sense of direction (and a driver in the driving seat) to the economy. And that Driver needs to represent the true collective interests of the people through collective planning and decision-taking.
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ConcernedCanuk Donating Member (1000+ posts) Click to send private message to this author Click to view this author's profile Click to add this author to your buddy list Click to add this author to your Ignore list Fri Feb-27-09 09:46 AM
Response to Original message
3. What crisis?

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Greyhound Donating Member (1000+ posts) Journal Click to send private message to this author Click to view this author's profile Click to add this author to your buddy list Click to add this author to your Ignore list Fri Feb-27-09 09:57 AM
Response to Original message
4. Controlling it's own currency is one of the prime requisites of any nation.
Who or whatever controls a nation's currency rules the nation, regardless of title or law. Abrogating that responsibility was one of the Congress' greatest failures in our history. The People of the United States are the government and we must attend to this duty. Allowing control of our nation to be usurped by an infinitesimal class of oligarchs is the root of all of our problems, for they are not subject to our wishes, do not share our goals, and operate from a standpoint of pure self-interest.

This is an excellent point, thanks for posting it.

"Let me issue and control a nation’s money and I care not who writes the laws." - Mayer Amschel Bauer Rothschild
:kick: & R

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Ghost Dog Donating Member (1000+ posts) Journal Click to send private message to this author Click to view this author's profile Click to add this author to your buddy list Click to add this author to your Ignore list Fri Feb-27-09 02:44 PM
Response to Original message
6. The American state is absolutely central.
Edited on Fri Feb-27-09 02:45 PM by Ghost Dog
Final paragraphs of this February 16, 2009 interview with Leo Panitch, though, show that Prof. Panitch dosn't feel very optimistic:

The American state is absolutely central. It is no accident that the G20 meeting took place in Washington. Everyone sees that whatever resolution there is to this crisis will have to be undertaken under the aegis of the American state, and everyone is hoping that Obama will be able to provide the kind of leadership – for capitalists – that will accomplish that.

So I think the American state is still very much at the centre of global capitalism. The material underpinnings of that hegemony have rested in part on New York as a financial centre. So it's a good question, what happens to that hegemony if New York seizes up as a financial centre? But I just don't see what could conceivably replace it. Certainly nothing in Asia could replace New York as a financial centre. People can start arguing that the Chinese state has financial clout, but we see how much the Chinese economy has been affected by this crisis originating in the U.S. economy.

It will certainly be an enormous challenge for the Americans to hold it all together. But it is only the Americans that can hold it all together; and all the world's capital, more than ever, is looking to the Americans to hold it all together.

But if the U.S. government does it very imperfectly...

Yes, but I don't see any grounds for serious inter-imperial rivalry unless there are fundamental changes in the balance of class forces and state structures in other parts of the world, so that countries move in a national-socialist, fascist direction which would break down globalisation, or there is the kind of change in class relations that would put socialist options on the agenda, which would mean disarticulating from capitalist globalisation and attempting to re-articulate on the basis of new international socialist strategies. On the basis of the class configurations that exist in the regions outside North America, I don't see either of those things happening soon.

The question remains of whether the Americans will pull it off. If they don't, will that produce social and political disruptions that would lead to something else? Maybe. But on the basis of the current configurations, with the types of capitalist classes and state bureaucracies that are oriented to maintaining the relationships that have developed over the last 30 years under global capitalism, I don't think we can speak seriously of inter-imperialist rivalry.

(Socialist Project Bullet)
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